Nicor Gas says users owe $7 million

CUB says Peoples Energy overcharged by more than $100 million

August 07, 2003|By Melita Marie Garza, Tribune staff reporter.

Despite admitting that it overcharged consumers by $20 million, Nicor Gas now says consumers owe the utility almost $7 million.

"It's Jesse James coming back to the bank for more," said Robert Kelter, director of litigation for the Citizens Utility Board, an advocacy group. "They've already taken money that they have no right to take and now they are coming back to take more."

Nicor's consumers live in the northern third of Illinois.

Separately, CUB said it planned to release a study Thursday showing that Peoples Energy overcharged its one million consumers in Chicago by more than $100 million during the winter of 2000-2001, when gas prices skyrocketed to record levels.

CUB said its study would demonstrate how the company allegedly cost consumers money by selling cheaper gas in storage to a third party, then buying more expensive gas for customers later and passing on the higher costs.

A Peoples Energy spokeswoman called CUB's allegations "false and irresponsible."

In the Nicor case, the Illinois Commerce Commission must still approve the rate request before any costs are passed onto consumers.

Kris Lathan, a spokeswoman at the unit of Naperville-based Nicor Inc., said she couldn't say how much individual consumers would be billed. But spread among 2 million customers, the charge could amount to about $3.50 per customer.

The company disclosed the amount it believes it is owed in a filing Tuesday evening with the ICC.

The Securities and Exchange Commission and the U.S. attorney's office have been investigating the gas company since a whistleblower last year alleged that the company had engaged in fraudulent accounting in its unique natural gas purchase plan, known as the performance-based rate plan.

Nicor got approval for the rate plan in 1999, which allowed the company to split savings it made on gas purchases with consumers.

The whistleblower alleged that the company used accounting techniques to tap into an inventory of cheaper gas. Purchased for 3 cents a therm, the gas had been on its books from the 1950s, and consumers should have been entitled to have the complete savings from the stored gas passed on to them, according to CUB.

Prior to an investigation by former U.S. Atty. Scott Lassar, hired by the board of Nicor Inc., Nicor Gas reported that it had saved $54 million to be shared by consumers and the company over the first two years of the program, 2000 and 2001. After adjusting for accounting and other errors pointed out by Lassar, Nicor then said it owed consumers $20.6 million for the two years.

For the year 2002, the company now says it saved $53.7 million on its gas purchases, and was entitled to recoup $26.8 million--about half of the savings--from consumers. That would mean consumers still owe the utility almost $7 million, including interest.

"It seems that no matter what Nicor does, it can come up with experts that rationalize the company's actions in ways that benefit the company," CUB's Kelter said.

Kelter noted that the $20 million does not include other findings of the Lassar report that would have required the company to give even more money back to consumers.

Kelter also questioned whether the 2002 figure should be considered savings on purchases.

"Out of the $53.7 million in savings, $20 million was from the release of older gas in storage," Kelter said. "It is highly questionable whether the commission would have allowed them to participate in the savings of that gas if they had been upfront about how they would generate the `savings.'"

In the company's latest ICC filing, Rocco D'Alessandro, Nicor's senior vice president for operations, said the company has taken steps to avoid future accounting errors, including implementing an extensive training program for its gas supply purchasing department.